US And China Bicker Over Currencies – Reuters

Yesterday, China’s central bank set the daily trading midpoint of the yuan at 7.3647 per dollar. This is the lowest point after July 2005. In the two-days “strategic economic dialogue”, US Treasury Secretary Henry Paulson said stronger Yuan currency is good for controlling inflation in China. From Reuters via The Financial Times:

China needs a stronger currency to fend off inflation, US Treasury Secretary Henry Paulson said on Wednesday, drawing a cool response from Chinese officials already upset by Washington’s lecturing on food safety.

The disagreements, aired on the first day of a two-day “strategic economic dialogue” near Beijing, underscored the growing complexity of a relationship that Paulson said was now central to maintaining global economic prosperity. “China’s leaders have voiced concerns about China’s macroeconomic stability, in particular mounting inflation, growing asset bubbles and possible overheating. A more flexible exchange rate policy is especially important to China now, given these risks,” Paulson said. [Full Text]